EMC shares spike on anticipated Dell buyout

EMC shares rose 4% in after-hours trading on Friday on a report from technology news outlet Re/code that Dell is offering $27.25 a share in cash and a tracking stock in VMware. Combined that would bring the per-share buyout offer to more than $30. The Wall Street Journal pegged the per-share price in the low $30s. That would mean a total price tag of $60 billion.

VMware is the successful cloud software company that’s 80% owned by EMC. The tracking stock would follow the 20% of VMware that EMC does not own. The bulk of the offer will be in cash but Dell is planning to use equity in VMware to help pay for the acquisition of EMC, people familiar with the matter told Reuters on Friday.

A deal could come early next week. The $60 billion or so takeover attempt by Dell would be the largest tech deal ever. Dell’s chief executive Michael Dell was in New York on Friday meeting with bank executives, Re/code reported. Dell has been negotiating directly with EMC CEO Joe Tucci. EMC shares closed up 2.5% to $27.86 but rose to $28.85 in after-hours trading on Friday. “While we think this deal is still a ‘bad dream’ for EMC shareholders and more of a nightmare for (VMware) investors, it appears based on numerous media reports that EMC/Dell are working hard to hammer out an agreement,” said Daniel Ives, an analyst with FBR Capital Markets. “In our opinion, EMC shareholders need to see at least a $30/share bid to warm up to this deal.”

Under pressure from activist shareholders, EMC has been exploring strategic options for more than a year. “We continue to believe that the mere existence of conversations with Dell are consistent with our belief that EMC’s board is continuing a strategic review of myriad options, the outcome of which will be beneficial to shareholders,” said Sanford Bernstein analyst A.M. (Toni) Sacconaghi, Jr. in a research note this week.